The common currency rallied hard after last week’s European Union summit. Stocks rebounded. Crisis over! Happy scenes all around (apart from the naysayers who stubbornly held on to their view that it couldn’t last.)

Well, guess what? It didn’t last. Now we’re in europanic mode.

There are several candidates for the slump in investor confidence. MF Global’s demise Monday, dubbed by some a “baby Lehman,” is making waves as traders figure out the ramifications for the firm’s creditors and counterparties. Economic data point to a pullback in Chinese growth, albeit not a super scary one.

But the main culprit is of course Greece, where the prime minister has decided to give the people the opportunity to vote on the rescue package agreed last week. In a way, it’s only fair. After all, the German parliament voted on boosting the size of the rescue fund last week. Without lawmakers’ say-so, Angela Merkel couldn’t really contribute to the summit at all.

Could it be that the politicians and eurocrats who designed the structures of the euro zone always knew they were flawed, but reasoned that a structural breakdown would enable them to bring in the common fiscal policy that would otherwise have been politically impossible?

This writer generally has little time for conspiracy theories, but Richard Jeffrey, chief investment officer at Cazenove Capital Management, makes a compelling case.

Throughout the current crisis involving Greece and Europe’s banks, there has been a widespread assumption that the euro zone’s problems have been caused by a mistaken belief that if the political will were strong enough it would be possible to overcome the clear economic flaws in the system’s design.

The idea that the architects always knew the system would break down but reasoned that such a collapse would enable them to bring in the deeper union that many of them favored suggests something more than naivety.

“Some of the politicians who introduced the euro, who pressed for it to be introduced, realized we would come to this crisis at some stage but they also realized that the crisis would take them further towards their goal, which was fiscal union as well, and creating a United States of Europe,” Mr. Jeffrey told listeners to Wake Up to Money on BBC Radio 5 Live on Monday.

“So in a sense the reaction of euro land to say what we need now is a tighter fiscal union is exactly what people wanted,” he added. “They knew some of the risks they were taking and knew there would be a crisis at some stage.”

For a country that still insists on nuclear bunker space for every citizen, Switzerland’s preparations for a euro meltdown shouldn’t come as a surprise.

But they do illustrate the steady decline in global confidence in the future of the single currency on the same weekend that Greece effectively admitted it’s going to miss its budget targets once again.

Swiss Finance Minister Eveline Widmer-Schlumpf said that although capital controls and negative interest rates aren’t a topic for discussion, they are “being examined.”

In other words, Switzerland is preparing for the worst.

Given recent data, this certainly seems wise as the country is highly exposed to the euro zone and after months of struggling against a decline in the euro, the Swiss economy is finally showing signs of succumbing.

Now it could be the country’s chance to do so again. Holding a referendum on the euro would give the Greek people a voice on how to take the medicine for years of overspending.

Either, stay with the single currency and have further drastic spending cuts and austerity dictated by the terms of successive bailouts. Or, leave the euro zone and regain fiscal independence but risk years of further penury as the country finds itself unable to raise foreign loans.

This is the option Prime Minister George Papandreou may be prepared to give the Greek people as stories of his support for a referendum are floated in the Greek press. The Greek government has, of course, denied the stories but as euro-zone tensions continue to rise and the future of the euro becomes increasingly untenable, the Greeks may find that they are not the only Europeans being given this choice.

Political instability and rebellion have stretched across the Mediterranean’s North African coastline and up to Syria, but why should they stop there? Why should they not stretch to Greece, for example?

The Greek military is still a very significant force in the country. Greece spends more on its armed services as a percentage of GDP than any other European Union country–3.2% against an EU average of 1.6%, according to Stockholm International Peace Research Institute data.

The day Greece runs out of money–barring yet another massive infusion from the EU, the ECB and the IMF–draws closer by the day. When bureaucrats don’t get paid, they down tools and go on strike. But what happens when the money stops flowing to the army?

In June a report from the CIA concluded that a military coup was possible in Greece. This was picked up business blog Business Insider, for instance.

Chinese takeaways aren’t any good for the euro as Beijing is not putting enough on the plate.

For months now, China has stepped forward at various stages during the euro-zone debt crisis, promising its support for Greece, Portugal, Spain and even Ireland.

This week, there have been reports that Beijing is now wooing Italy with talk of purchases of strategic Italian assets. With $3 trillion of foreign exchange reserves rattling in its pockets, China’s interest in the euro zone is hardly surprising.

First of all, the region is China’s largest trading partner and the last thing Beijing would like is for the euro zone to fall apart and for demand for Chinese goods to decline even further, threatening economic and political stability at home.

Secondly, support from China would help to halt the decline in the euro and ensure that the health of China’s previous investment in the region was being preserved. Chinese officials were once again keen to call this week for stability in the euro zone as well as the single currency as the euro started to fall sharply again after months of relative resilience.

Thirdly, there is the simple case of bargain hunting. China has the money. The euro zone has the goods at knock-down prices with few other takers around.

Beijing can hardly be blamed for seeing the attraction of attending what could look like an Italian car boot sale.

Having said all that, however, China has hardly been splashing the cash.

If Greece wants to remain part of the single currency now it will have to pay the price, no matter how high that price is. After a tense week in Germany, with Chancellor Angela Merkel just clinging to power and with the country’s constitutional court curbing her ability to throw money at the euro-zone debt crisis, the Greeks appear to have been given an ultimatum.

Not only did Ms. Merkel admit that letting Greece into the euro was a mistake but she sent a clear message to Athens that if they want to stay within the bloc, then they will simply have to agree to the austerity measures needed to reduce the country’s budget deficit.

Although the German leader pledged herself once again to the euro and the euro zone, she also issued a warning to all peripheral debtors that Germany won’t be paying their way anymore.

It’s not surprising that investors gave a lukewarm reaction to the proposals made by German Chancellor Angela Merkel and French President Nicolas Sarkozy Tuesday–with great fanfare–in the Élysée Palace in Paris.

“Tough questions about sanctions for fiscal misbehavior and the degree of sovereignty nations are prepared to pool remain unanswered,” Mr. Barr said.

Safe-haven German bunds were higher Wednesday. At 0955 GMT, 10-year bunds were yielding 2.27%, from 2.31% Tuesday, according to Tradeweb. Italian and Spanish 10-year yields were unchanged at just below 5%. They have been at or close to this level since the European Central Bank began buying Italian and Spanish sovereign bonds last week.

European stocks were falling early Wednesday as investors digested the proposals.

Mrs. Merkel acknowledged she doesn’t believe the troubles of the euro zone can be fixed with a “big bang.” But what the leaders of Europe’s top two economies recommended nevertheless disappointed as it looked rather like a series of recycled ideas.

Also, with the euro-zone debt crisis still dragging on, the Swiss currency’s safe-haven status will hardly be dented. The best the SNB can hope is that its myriad policies, along with the continued threat of direct market intervention, helps to at least slow the franc’s rally.

Certainly, pegging the franc to the euro was hardly a plausible alternative.

Recent speculation that Angela Merkel and Nicolas Sarkozy would underpin the survival of the euro–either with plans for a common euro-zone bond, in which all 17 member countries would be involved, or by expanding the size of emergency funding for peripheral debtors, through the EFSF–proved completely unfounded.

European Union leaders may have bought the euro some time but they haven’t brought it a solution.

The single currency may well have a comfortable summer. After many months of market tension, politicians as well as markets players will be only too glad to head for the beaches now that a second bail out for Greece has finally been negotiated.

But, come the autumn, the real test of the €159 billion bailout that the leaders have just cobbled together for Greece will take place.

The details of private sector involvement, the reaction of credit rating agencies, the impact on the borrowing costs of other peripheral euro zone debtors should all be a lot clearer by then.